Kuhnel v. CNA Ins. Companies

• Decision Date: 30 June 1999
• Citation: 731 A.2d 564,322 N.J. Super. 568
• Parties: Diane KUHNEL, individually and on behalf of all other Workers' Compensation Lien Payers similarly situated, Plaintiffs-Appellants, v. CNA INSURANCE COMPANIES, a Workers' Compensation Lien Payee, Continental Casualty Co., American Casualty Company of Reading, Pennsylvania, National Fire Insurance Company of Hartford, Transcontinental Insurance Company, Transportation Insurance Company, and Valley Forge Insurance Company, Defendants-Respondents. James Streeper, and Anthony Gaitanos, individually, and on behalf of all other Workers' Compensation Lien Payers similarly situated, Plaintiffs-Appellants/ Cross-Respondents, v. Aetna Insurance Company, a New Jersey Workers' Compensation Lien Payee, Defendant-Respondent/ Cross-Appellant.
• Court: New Jersey Superior Court

731 A.2d 564

322 N.J. Super. 568

Diane KUHNEL, individually and on behalf of all other Workers' Compensation Lien Payers similarly situated, Plaintiffs-Appellants, v. CNA INSURANCE COMPANIES, a Workers' Compensation Lien Payee, Continental Casualty Co., American Casualty Company of Reading, Pennsylvania, National Fire Insurance Company of Hartford, Transcontinental Insurance Company, Transportation Insurance Company, and Valley Forge Insurance Company, Defendants-Respondents.

James Streeper, and Anthony Gaitanos, individually, and on behalf of all other Workers' Compensation Lien Payers similarly situated, Plaintiffs-Appellants/ Cross-Respondents, v. Aetna Insurance Company, a New Jersey Workers' Compensation Lien Payee, Defendant-Respondent/ Cross-Appellant.

Superior Court of New Jersey, Appellate Division.

Argued May 25, 1999.

Decided June 30, 1999.

Robert S. Kitchenoff for plaintiffs-appellants in both appeals (Westmoreland, Vesper & Schwartz, and Mr. Kitchenoff (Weinstein Kitchenoff Scarlato & Goldman), attorneys; R.C. Westmoreland and Mr. Kitchenoff, on the briefs).

Richard V. Jones for defendants-respondent CNA Insurance Companies in A-4349-97T3 (Bressler, Amery & Ross, attorneys; Mr. Jones, on the brief).

Kevin T. Coughlin, Morristown, for defendant-respondent/cross-appellant Aetna Casualty and Surety Company in A-4689-97T5 (McElroy, Deutsch & Mulvaney, attorneys; Mr. Coughlin, of counsel and on the brief; Vincent E. Reilly, on the brief).

Before Judges KESTIN, WEFING and CARCHMAN. The opinion of the court was delivered by CARCHMAN, J.A.D

Chief Justice Charles Evans Hughes characterized questions of retroactivity "among the most difficult" issues addressed by courts, Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 374, 60 S.Ct. 317, 319, 84 L.Ed. 329, 333 (1940). Our Supreme Court acknowledged that "the passage of time and a maturing of retroactivity law have not rendered those issues any less vexatious." Coons v. American Honda Motor Co., 96 N.J. 419, 424-25, 476 A.2d 763 (1984),cert. denied, 469 U.S. 1123, 105 S.Ct. 808, 83 L.Ed.2d 800 (1985). We now address in the cases before us¹ the retroactivity of a judgment of the Chancery Division declaring that a workers' compensation lien established pursuant to N.J.S.A. 34:15-40 (Section 40) shall not include a respondent's portion of a petitioner's attorney and expert fees, an employer or insurer's expenses for a defense medical examination, or rehabilitative nursing services unless such nursing services "primarily benefitted the employee and were reasonably necessary to the injured employee's recovery." Judge Gibson determined, among the other issues presented, that in the Kuhnel case, the judgment would apply retroactively only to Kuhnel and those members of a class "who have not as of November 6, 1997, reached an agreement incorporated by a writing or release of any workers' compensation lien asserted by [defendant CNA Insurance Companies (CNA) ]." In the Streeper case, the judge concluded that the judgment applies retroactively only to Streeper and those others similarly situated "for whom, as of November 6, 1997,² a defendant's lien under N.J.S.A. 34:15-40 was an open question by reason of the lien's not having been resolved by judgment or by an agreement." Except for the judgment for unjust enrichment against defendant in the Streeper case, we affirm and hold that the limited retroactivity of the judgments ordered by Judge Gibson represents an appropriate application of the factors enunciated by the New Jersey Supreme Court in Coons, supra, 96 N.J. at 425,476 A.2d 763.

I.

We briefly address the facts and procedural history as well as identify the other issues raised on this appeal.

A.

Plaintiff Diane Kuhnel was injured during the course of her employment with Western Medical Services (Western) on September 5, 1990. She commenced a workers' compensation action against Western, and on September 22, 1993, the Division of Workers' Compensation (DWC), entered an order approving the settlement of that action. Kuhnel was awarded temporary disability benefits totaling $14,654 (September 6, 1990, to November 13, 1991). She was also found to be seventy percent totally and permanently disabled and awarded compensation totaling $58,094.65, after the applicable Social Security offset. Kuhnel's attorney was awarded counsel fees in the amount of $14,990, which were assessed $5,995 against Kuhnel and $8,995 against Western. Various other fees and costs were also assessed against both parties.

Kuhnel subsequently commenced a third-party action arising out of the same circumstances, which was settled on September 23, 1994, for $420,000. On November 2, 1994, CNA claimed a total lien of $72,121.69 under Section 40, which included, among other things, the portions of Kuhnel's counsel fees and other fees and costs which were assessed against Western by the compensation court.

B.

Plaintiff James Streeper was injured during the course of his employment with Michael's Limousine, Inc. (Michael's), on October 9, 1989.³ Streeper commenced a workers' compensation action against Michael's, and defendant Aetna Insurance Company (Aetna) provided Streeper certain benefits pursuant to Michael's workers' compensation insurance. After Streeper obtained a recovery from the tortfeasor in a third-party action, Aetna asserted a Section 40 lien of $25,335.37 for "medical payments" and "indemnity." Within the medical payments portion of the lien, Aetna included charges for a medical examination allegedly for the purpose of the workers' compensation claim, as well as the charges for rehabilitative nursing services.

Plaintiff Anthony Gaitanos was injured during the course of his employment with Caesars Hotel & Casino (Caesar's) on June 14, 1991. Gaitanos subsequently commenced a workers' compensation action against Caesar's as a result of his injury, and Aetna provided Gaitanos with certain benefits pursuant to Caesar's workers' compensation insurance. After Gaitanos obtained a recovery in his third-party action, Aetna asserted a Section 40 lien of $47,962.52 for "medical payments" and "indemnity." Within the total lien, Aetna included approximately $1,325 for medical examinations allegedly undertaken for Aetna for its defense of Gaitanos' workers' compensation claim.

C.

Kuhnel filed a class action complaint on behalf of herself and all other similarly situated workers' compensation lien payers (collectively Kuhnel) against CNA and related companies alleging the following: Count One, violations of Section 40; Count Two, violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20; Count Three, fraudulent and negligent misrepresentation; Count Four, negligence per se; Count Five, breach of insurer's duty of good faith; and Count Six, unjust enrichment. Subsequently, Streeper filed a class action complaint against Aetna and any unknown affiliated workers' compensation insurers (collectively Aetna), alleging the same six counts as Kuhnel as well as a seventh count to reach Aetna's affiliates. In the Kuhnel action, CNA filed an answer and counterclaim, asserting fraud, equitable fraud and unjust enrichment.

After various amendments to the complaints to join additional related parties, CNA and Aetna filed motions to transfer the matters from the Chancery Division to the DWC. Judge Gibson entered an order granting CNA's motion "only as to the issue of whether [CNA's] portion of [Kuhnel's counsel] fees and [CNA's] portion of [Kuhnel's] expert fee [are] properly chargeable as a portion of the lien pursuant to N.J.S.A. 34:15-40 against the third-party recovery in favor of [Kuhnel]." All other issues remained before the Chancery Division. A similar transfer of the first count of Streeper's complaint (violation of Section 40) to the DWC was ordered.

Judge Gibson entered an order granting Kuhnel's motion for class certification. The certified class was defined as follows: "All workers on whose behalf a payment was or will be made to satisfy a workers' compensation lien asserted by [CNA], which lien included or includes [counsel] fees, expert fees or other administrative costs and expenses." No members of the class have been formally notified of the pendency of this action. See R. 4:32-2(b).

After a hearing in the DWC on the remanded issues, the DWC concluded that CNA's portion of Kuhnel's counsel and expert fees were not properly chargeable as a portion of the lien pursuant to Section 40. In the Streeper case, the DWC similarly concluded that Aetna's medical examination for the workers' compensation claim (independent medical examination or "IME") and the costs for rehabilitative nurses services were not lienable under Section 40.

On defendants' motions, Judge Gibson entered an order dismissing the consumer fraud counts of both Kuhnel's and Streeper's complaints for failure to state a claim upon which relief can be granted, R. 4:6-2(e). After considering cross-motions for summary judgment on the various remaining counts of the complaints, Judge Gibson held in Kuhnel:

That the lien asserted by an employer or its workers' compensation insurance carrier in a workers' compensation matter pursuant to N.J.S.A. 34:15-40 against any recovery in a third-party action shall consist only of medical expenses incurred and compensation paid, and said compensation shall not include the respondent's portion of the petitioner's attorneys' fees nor the respondent's portion of the petitioner's experts' fees.

And in Streeper:

(a) A lien pursuant to N.J.S.A. 34:15-40 may not include an employer's or its insurance carrier's expenses for a defense medical examination because such an examination is not a medical expense but is primarily for the benefit of the employer/insurance carrier and would not be reasonably necessary to the injured employee's recovery; and

(b) A lien pursuant to N.J.S.A. 34:15-40 shall not include an employer's or its insurance carrier's expenses for so-called

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